To our shareholders
Precious Woods can look back on a successful and eventful year 2021. Increases in sales and revenue led to the financial successes we present in detail in the annual report. With an increase in sales of 17.6 % and an EBIT margin of 19.8 %, we have again made good progress. The high interest rates on borrowed capital and our excessively high working capital continue to have a negative impact. This excessive working capital is impairing our liquidity and, at the same time, we are unable to show the revenue hidden in our high inventories. These difficulties – which have arisen repeatedly due to logistics problems – hurt, and they overshadow the improvement of our operational activities. For this reason, and also because Covid-19 continued to complicate day-to-day operations and travel, 2021 was a major challenge.
Successful operational activity
In both Brazil and Gabon, sawmills achieved volume and yield increases in 2021. Combined with higher sales prices due to the good current market situation and reduced production costs, this resulted in an increase in profitability of which we can be proud. We see a lot of further potential: The new azobé hardwood sawmill in Bambidie is slowly entering normal operations after a difficult start. In Brazil, targeted, smaller investments are leading to increased cutting capacity, and we are confident that we will be able to maintain our results in 2022 despite currency fluctuations. In parallel to the technical and operational improvements, our management and specialized team in Switzerland, Gabon, Brazil, and the Netherlands knows how to ensure the stability and further development of our activities and processes with a great deal of commitment, motivation, and prudence. Last but not least, we can expect that our products made of tropical wood will continue to sell well in future, benefiting from the trend of increasing global demand for wood as a renewable raw and construction material.
Successful sustainable activity
The fact that Precious Woods passes its FSC and PEFC/PAFC certification audits with top marks almost goes without saying. This is because we, our management and our employees play a pioneering role in the sustainable management of tropical forest areas and will never compromise – this is the core of our vision and mission. With innovations such as the new FSC Ecosystem Services certifications for carbon storage and water conservation, we are also proving that sustainable forest management is one of the solutions to protect our world’s carbon sinks. As only the second company to be certified worldwide, we feel obliged to actively contribute our business model to the climate change debate. Because we are convinced that climate effective measures, are not exclusive to reforestation projects. And, of course, social sustainability completes our business model. Numerous projects presented in the following chapters – in cooperation with the local population but also with research institutions – are results or visible products of our effective activity.
Investments in renewal and growth
Over the past few years, we have laid the operational foundation for the further development of Precious Woods. We want to continue along this path and steadily improve our processes, products, and infrastructure. At the same time, we want to grow profitably – both qualitatively and quantitatively. Our defined strategic objectives include investments in the expansion of our managed forest areas in Brazil and Gabon, in the depth of our value chain, in our performance, and in our employees.
Unfortunately, our external debt in relation to EBITDA continues to be very high. The assets tied up in our forest areas in Brazil contribute to this. Given that growth financing via conventional financing institutions does not yet seem possible, we are actively seeking strategic partnerships and local financing options. Because interest on borrowing is too high, we have decided to issue a bond to counteract this situation.
Outlook and thanks
Infrastructural and institutional obstacles, along with the effects of the global pandemic, once again impacted the year. The operational progress and the financial result can be weighted and evaluated all the more in light of these circumstances. Our EBITDA of EUR 15.1 million, or 27.7 %, is a sustainable result that gives us an incentive, opens up opportunities, and at the same time represents an obligation.
On behalf of the entire Board of Directors, I would like to express my thanks for all the valuable contributions, the huge commitment, and the flexibility shown by the management of the Group, but also of the companies in Brazil, Gabon, and Switzerland. In particular, I would like to thank Markus Brütsch for his prudent leadership, but also for our good and constructive work together. And I would like to thank our approximately 1 500 employees of Precious Woods for their daily work not only for our company, but also for our mission.
I would also like to warmly thank my colleagues on the Board of Directors. I very much appreciate the open and reliable exchange of ideas. And finally, we would like to thank you, our valued shareholders – for your loyalty and for continuing to accompany, support, and promote the activities of Precious Woods through your commitment.
We look forward to welcoming you in person at this year’s General Meeting on 19 May 2022 at the Volkshaus in Zurich.
Chairwoman of the Board of Directors